• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The College Investor

Student Loans, Investing, Building Wealth

  • About
  • Podcasts
  • Research
  • Contact
  • Save For College
      • How To Start

      • How To Save For College
      • How To Pay For College
      • What Is the Average Cost of College?
      • What Is A 529 Plan and Where to Open One in Your State
      • How Much Should You Have In A 529 Plan By Age
      • How To Use A 529 Plan For Private Elementary And High School
      • What Are Qualified Expenses For A 529 Plan (And What Doesn’t Count)?
      • The Best Brokers To Open A 529 Plan
      • Tools + Accounts

      • 529 Plans: The Ultimate College Savings Plan
      • 529 Plan Contribution Limits
      • Prepaid Tuition Plans | What To Know
      • Understanding And Using 529A ABLE Accounts
      • Using A Roth IRA To Save And Pay For College
      • FAFSA Deadlines for Financial Aid
      • CollegeBacker Review
      • Upromise Review
      • UNest Review
      • Other Options

      • Student Loan And Financial Aid Programs By State
      • The Guide To Military And VA Education Benefits
      • How To Fill Out The FAFSA
      • How To Find College Scholarships
      • The Best College Scholarship Search Websites
      • How To Find Grants To Pay For College
      • Pell Grants: What They Are And How To Qualify
      • Understanding Federal Work-Study
      • How To Use A 529 Plan If Your Child Doesn’t Go To College
  • Student Loans
      • Borrowing

        • How Student Loans Work
        • How To Apply For A Student Loan
        • Best Student Loans And Rates In September 2023
        • 10 Best Private Student Loans Of September 2023
        • Best Student Loans To Pay For Graduate School
        • Best Student Loans For Medical School
        • Parent Loans To Pay For College
        • No-Cosigner Student Loan Options
        • Guide To Income Sharing Agreements (ISAs)
        • Best International Student Loans
      • Get Out Of Debt

        • Best Student Loan Refinance Companies In September 2023
        • Best Student Loan Repayment Plans
        • Best Student Loan Refinancing Bonuses And Promotional Offers Of September 2023
        • Student Loan Forgiveness Programs (The Complete List)
        • The Full List Of Student Loan Forgiveness Programs By State
        • Public Service Loan Forgiveness (PSLF)
        • Top Student Loan Scams
        • Average Student Loan Monthly Payment
        • Average Student Loan Debt By Year
      • Reviews

        • Credible Review
        • Splash Review
        • Ascent Review
        • Citizens Bank Review
        • Earnest Review
        • ELFI Review
        • Laurel Road Review
        • LendKey Review
        • SoFi Review
        • Sallie Mae Review
  • Investing
      • How To Start

        • How To Start Investing in High School
        • How To Start Investing In College
        • How To Start Investing In Your Twenties For 22 – 29 Year Olds
        • How To Start Investing In Your 30s For 30 – 39 Year Olds
        • How To Start Investing With $100 Or Less
        • How To Give Kids The Gift Of Stock
        • What Is Dividend Growth Investing
        • IRA Rollover Chart
      • Tools + Accounts

        • Best Online Stock Brokers
        • The Best Traditional And Roth IRA Accounts
        • The Best Robo-Advisors
        • The Best Investing Apps
        • The Best Places to Trade Options
        • The Best Places To Open A Health Savings Account
        • The Best Solo 401k Providers
        • The Best Self-Directed IRA Providers Of 2023
        • Best Cryptocurrency Exchanges
      • Reviews

        • Vanguard Review
        • Fidelity Review 2023
        • M1 Finance Review
        • TD Ameritrade Review 2023
        • Charles Schwab Review
        • Robinhood Review
        • Webull Review
        • Betterment Review 2023
        • Wealthfront Review
  • Earn More Money
      • Extra Income

        • 20 Best Side Hustles You Can Start Earning With In 2023
        • 54 Side Hustle Ideas To Make Money Fast In 2023
        • 100 Ways To Make Money In College In 2023
        • How To Make Money From Home: 80 Irresistible Ideas
        • How To Make Money In One Hour: 5 Quick Ideas You Can Try Now
        • 10 Interesting Ways You Can Make Money Driving
        • High-Paying Side Gigs That Earn $1,000 or More Per Month
        • The 10 Best Money-Making Apps
        • Best Paid Survey Site List: Earn Money For Giving Your Opinion Online
        • 10 Crazy Ways To Make $10,000 You’ve Never Heard Of
      • Build Wealth

        • 40 Passive Income Ideas For 2023 To Build Real Wealth
        • 3 Ways To Make $50,000 Per Year Without Working With Passive Income
        • How To Become A Real Estate Investor With Just $500
        • 15 Best Online Business Ideas
        • Residual Income: 7 Super Smart Ways to Build It
        • The Most Common Multiple Income Streams
        • How To Become A Real Estate Mogul With Only $10,000
      • Reviews

        • Fundrise Review
        • RealtyMogul Review
        • FarmTogether Review
        • AcreTrader Review
        • Swagbucks Review
        • Survey Junkie Review
        • TopCashback Review
        • DoorDash Review
  • Personal Finance
      • Banking

        • Best High Yield Savings Accounts Of September 2023
        • 10 Best Money Market Accounts Of September 2023
        • 10 Best Free Checking Accounts In September 2023
        • Best Bank CD Rates
        • 10 Best Business Checking Accounts In September 2023
        • Best Online Banks Of September 2023
        • Best Credit Unions Nationwide Of September 2023
        • Best College Student Checking Accounts Of September 2023
      • Insurance

        • Best Life Insurance Companies
        • Renters Insurance
        • Car Insurance
        • Pet Insurance
        • Umbrella Insurance
        • Disability Insurance
        • Tuition Insurance
        • Travel Insurance
      • Credit Tools

        • Best Budgeting Apps
        • Cash Advance Apps
        • How To Get A Free Credit Score Report
        • Best Credit Monitoring Services For 2023
        • Debt Settlement: Inside The Secret World
        • Credit Repair Explained: Should You Pay For Help?
        • Best Personal Loan Companies And Lenders
        • Online Loan Companies To Borrow From Home
      • Tax

        • Best Tax Software
        • Free Tax Software
        • IRS Tax Refund Calendar
        • Common IRS Questions and Errors
        • Federal Tax Brackets
        • Capital Gains Tax Brackets
        • 401k Contribution Limits
        • IRA Contribution Limits
        • HSA Contribution Limits
  • Awards
  • Search
Home / Investing / 529 Plan / Can You Use a 529 To Pay For College Overseas?

Can You Use a 529 To Pay For College Overseas?

Updated: February 16, 2023 By Robert Farrington

38Shares
  • Facebook
  • Twitter
  • LinkedIn
  • Pinterest
  • Email
  • Print

At The College Investor, we want to help you navigate your finances. To do this, many or all of the products featured here may be from our partners. This doesn’t influence our evaluations or reviews. Our opinions are our own. Any investing information provided on this page is for educational purposes only. The College Investor does not offer investment advisor or brokerage services, nor does it recommend buying or selling particular stocks, securities, or other investments. Learn more here.Advertiser Disclosure

There are thousands of financial products and services out there, and we believe in helping you understand which is best for you, how it works, and will it actually help you achieve your financial goals. We're proud of our content and guidance, and the information we provide is objective, independent, and free.

But we do have to make money to pay our team and keep this website running! Our partners compensate us. TheCollegeInvestor.com has an advertising relationship with some or all of the offers included on this page, which may impact how, where, and in what order products and services may appear. The College Investor does not include all companies or offers available in the marketplace. And our partners can never pay us to guarantee favorable reviews (or even pay for a review of their product to begin with).

For more information and a complete list of our advertising partners, please check out our full Advertising Disclosure. TheCollegeInvestor.com strives to keep its information accurate and up to date. The information in our reviews could be different from what you find when visiting a financial institution, service provider or a specific product's website. All products and services are presented without warranty.

How To Use A 529 Plan For Overseas College Or Education

Traveling abroad is exciting, yet few college students get to have this experience, simply because they didn’t know how to make it an affordable and accessible option. While most students want to go abroad and learn while being immersed in another culture, the staggering cost is a huge obstacle to spending time studying abroad and gaining life experience.

Don’t let the cost discourage you- there may be a tax-free way to study abroad and have the adventures and experiences you will remember for life, so keep reading!

It's possible to use a 529 plan to pay for college (or even potentially elementary K-12 education) abroad. Here's what to know.

Table of Contents
What Is A 529 Plan?
Benefits Of A 529 Plan
How A 529 Can Be Used To Help College Students Study Abroad
What Expenses Can a 529 Be Used To Pay When Studying Abroad?
What Can A 529 Not Be Used To Pay?
When Penalties Apply
You Can Use Your 529 To Study Abroad If You Follow The Rules

What Is A 529 Plan?

529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.

A 529 plan is a tax-advantaged savings plan designed to encourage and reward people who save for future college expenses. The 529 plan college-savings accounts programs are also regulated by the Internal Revenue Service. Because 529 plans are specifically designated for higher education, they also provide tax benefits.

Distributions taken from a 529 plan are allocated between principal and earnings on a pro-rata basis, which means that every withdrawal includes an earnings portion. As a result, there are enforced limitations on 529 plan qualified expenses.

The SEC provides that there are two types of 529 plans: pre-paid tuition plans and college savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities also sponsor a pre-paid tuition plan.

Because 529 Plans are state-sponsored college savings accounts, the rules determining plan use and fund withdrawal capabilities can vary, so it is of the utmost importance to speak to your 529 plan provider for information on plan withdrawal terms and conditions.

Also, interest rates (the main reason for a 529 plan) significantly vary by fund, so research your options before selecting your funds. You should also budget a monthly contribution to fund your 529 plan.

Benefits Of A 529 Plan

There are many benefits to participating in your state’s 529 plan. However, with those benefits come restrictions, since qualified withdrawals are strictly limited to specified higher-education expenditures.

When you invest in a 529 account, the savings grow significantly faster than your average savings account. This is the main benefit of a 529 that makes the cost of studying abroad much more manageable than a traditional savings account.

How A 529 Can Be Used To Help College Students Study Abroad

Most (but not all) study-abroad program expenses can be funded through withdrawals from a 529 account. 529 distributions are tax-free if they are used to pay for qualified higher education expenses at a college or university that is eligible for Title IV higher federal education aid.

These higher education institutions will have a federal school code that can be listed on the Free Application for Federal Student Aid (FAFSA). There are more than 100 foreign colleges that are eligible for federal student aid.

You can use 529 plan funds to pay for study abroad expenses if the study program at the foreign institution is eligible for credit at the student's US home institution, and if the foreign institution is eligible for Title IV federal student aid, which can be determined by looking for the federal school code.

In simple terms, your school has to give credit for the study abroad program, and the foreign college where you will be studying abroad must be eligible for financial aid.

For more details about the types of study abroad programs, compare the reviews sorted by country, program and duration to see how they can benefit your education. By creating a budget and savings plan for your international studies, you will be able to quickly fund your 529 plan and meet your goal.

Learn how to start saving with a 529 plan and watch your account grow.

What Expenses Can a 529 Be Used To Pay When Studying Abroad?

Qualified Expenses for enrollment or attendance at the institution normally fall into one of these three main categories:

1. Tuition, Fees, Books, Supplies, and Equipment

The majority of study-abroad expenses consist of tuition, fees and approved room-and-board expenses, which are eligible to be funded through withdrawals from a 529 plan college-savings account. Required textbooks and supplies (which can get expensive really fast!) are also covered.

2. Room and Board

Room and board includes the costs of rent (whether living on or off-campus), and food. The expenses must be less than or equal to the room and board allowance from the college’s cost of attendance figures (or the actual amount charged by the school if the student is living on campus) in order to be considered as qualified expenses. Also, the student must have at least half-time enrollment status to qualify, regardless of whether or not they live on campus.


The IRS requires that for room-and-board expenses to qualify for 529 withdrawals, they must be a direct educational expense. If you take a vacation while studying abroad and stay at another location, that room and board expense will not qualify.

3. Computers, Peripheral Equipment, Computer Software, and Internet Access Charges

Previously, the school had to specifically require computers, peripheral equipment, software and Internet access in order to consider these as qualified expenses. With recent changes observing the necessity for technological equipment in education, they are all considered qualified expenses.

What Can A 529 Not Be Used To Pay?

While the definition of a ‘qualified expense’ appears to be all-inclusive, there are many expenses that are not covered as a qualified expense. In fact, many people mistakenly claim some of these expenses only to find that they are not qualified expenses, which can result in unexpected tax penalties.

Travel: Costs to commute to and from school do not qualify. Surprisingly, gas, airfare, and bus fare are all excluded from transportation costs. A word of caution- if you go on weekend trips or spring-break trips not related to educational activities away from your study abroad campus, those expenses will not be covered.

Sports and Activity Fees: Expenses for extracurricular activities such as sports and recreational activities cannot be reimbursed from a 529 account. Interestingly enough, even if the beneficiary has a sports scholarship, the expenses related to sports activities still cannot be paid from a 529 account.

Student loans: A 529 account cannot be use to pay back student loans, generally. However, you can use a one-time $10,000 withdraw to pay student loans. Some states DON'T allow this. 

Certain Electronics: While computers and software are now allowed as a qualified expense, other electronics traditionally used for entertainment, such as theater equipment are projectors are not qualified expenses (unless the items are specifically required by the school for enrollment or attendance).

Insurance: Medical expenses and health insurance premium do not qualify. Neither are international healthcare costs or, not unsurprisingly, foreign transaction fees. Such ineligible expenses need to be figured into the overall cost of the trip.

Important Information about the American Opportunity Tax Credit (AOTC) or Lifetime Learning Credit – Expenses used to qualify for the AOTC or Lifetime Learning Credit must be excluded from qualified expenses.

When Penalties Apply

Non-qualified withdrawals are subject to income tax as well as a 10 percent penalty on the earnings portion of the withdrawal, which is why it is important to be sure you attend an IRS-eligible educational institution, the expenses qualify, and you are enrolled at minimum as a half time student. There are rare exceptions to withdrawing without penalty, such as veteran’s assistance, attending a U.S. military academy, disability, or death.

First, be sure that the expenses are qualified expenses from an eligible educational institution. Next, make sure that a qualifying person incurred the expenses when the expenses were incurred.

The qualified expenses need to be incurred by the student in connection to attendance or enrollment at a university. While the parent may pay the actual bill, the debt itself must belong to the student.

Withdrawals taken from a 529 plan must also be taken in the same calendar year that the qualified expenses are paid.

If someone else pays your expenses and you reimburse them, you are still able to make a withdrawal from your 529 plan. The withdrawal will generate a 1099 to you as the account owner, and you will need to trace the withdrawal back to the expense.

Learn more about the 529 plan penalty (and how to avoid it) here.

You Can Use Your 529 To Study Abroad If You Follow The Rules

While most people dream about studying abroad and experiencing life outside of the country, the high price tag associated with tuition and room and board fees prevents most students from applying to study abroad. Fortunately, the 529 plan gives you hope by allowing students save money on qualified expenses, and qualified expenses are the majority of the cost of studying abroad. Do your research to get a clear understanding of how much it will cost so you can work towards your goal.

Key Points To Remember

  • The 529 distribution must be used to pay for qualified higher education expenses.
  • The educational institution must be eligible for at the student’s US home institution.
  • The foreign college must be Title IV federal student aid.
  • The student must at least be enrolled as a half time student.
  • When used properly, the 529 plan alleviates the burden of this expensive (yet worthwhile) experience!
  • Tell us your plans for how you will use your 529 plan to study abroad in the comments below!

When used properly, the 529 plan alleviates the burden of this expensive (yet worthwhile) experience!

Tell us your plans for how you will use your 529 plan to study abroad in the comments below!

Robert Farrington
Robert Farrington

Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page or on his personal site RobertFarrington.com.

He regularly writes about investing, student loan debt, and general personal finance topics geared toward anyone wanting to earn more, get out of debt, and start building wealth for the future.

He has been quoted in major publications, including the New York Times, Wall Street Journal, Washington Post, ABC, NBC, Today, and more. He is also a regular contributor to Forbes.

Editor: Clint Proctor

Editorial Disclaimer: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, or other advertiser and have not been reviewed, approved or otherwise endorsed by any of these entities.
Comment Policy: We invite readers to respond with questions or comments. Comments may be held for moderation and are subject to approval. Comments are solely the opinions of their authors'. The responses in the comments below are not provided or commissioned by any advertiser. Responses have not been reviewed, approved or otherwise endorsed by any company. It is not anyone's responsibility to ensure all posts and/or questions are answered.
Subscribe
Connect with
I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree
Notify of

I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree

130 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments

Primary Sidebar

Saving For College Tools

>  Backer (recommended)
>  Upromise (recommended)
>  Unest
>  EarlyBird

More On 529 Plans

  • 529 Plans: The Ultimate Guide To College Savings Plans
  • 529 Plan Contribution Limits
  • How Much Should You Have In A 529 Plan By Age
  • Can A 529 Be Used To Pay Student Loans? Yes, And Here’s How.
  • How Does A 529 Plan Affect Your Financial Aid And FAFSA?
  • Qualified Expenses For A 529 Plan
  • 529 Plan Rollovers And Transfers: Pros And Cons

More On Financial Aid

  • Student Loan And Financial Aid Programs By State
  • How To Save For College
  • How To Pay For College
  • Military And VA Education Benefits To Pay For College
  • How To Find Grants To Pay For College
  • How To Fill Out The FAFSA And Why It Matters
  • FAFSA Deadline For Financial Aid In 2023

Footer

Who We Are

The College Investor is an independent, advertising-supported financial media publisher, focusing on news, product reviews, and comparisons.

Connect

  • Contact Us
  • Advertise
  • Press & Media

About

  • About
  • Our Team
  • Podcast
  • Editorial Guidelines
  • How We Make Money
  • Archives

Social

Copyright © 2023 · The College Investor · Privacy Policy ·Terms of Service · DO NOT Sell My Personal Information

wpDiscuz